STATE OF CALIFORNIA GRAY DAVIS, Governor

PUBLIC UTILITIES COMMISSION

505 VAN NESS AVENUE

SAN FRANCISCO, CA 94102-3298

February 19, 2002 Item 1

Agenda 3/21/02

TO: PARTIES OF RECORD IN RULEMAKING 01-05-047

This is the proposed decision of the Administrative Law Judge in this proceeding. It will be on the Commission's agenda at the next regular meeting, which is scheduled for March 21, 2002. This matter was categorized as ratesetting and is subject to Pub. Util. Code § 1701.3(c). Pursuant to Resolution ALJ-180 a Ratesetting Deliberative Meeting to consider this matter may be held upon the request of any Commissioner. If that occurs, the Commission will prepare and mail an agenda for the Ratesetting Deliberative Meeting 10 days before hand, and will advise the parties of this fact, and of the related ex parte communications prohibition period.

The Commission may act at the regular meeting on March 21, 2002, or it may postpone action until later. If action is postponed, the Commission will announce whether and when there will be a further prohibition on communications.

When the Commission acts on the proposed decision, it may adopt all or part of it as written, amend or modify it, or set it aside and prepare its own decision. Only when the Commission acts does the decision become binding on the parties.

Parties to the proceeding may file comments on the proposed decision as provided in Article 19 of the Commission's "Rules of Practice and Procedure." These rules are accessible on the Commission's website at http://www.cpuc.ca.gov. Pursuant to Rule 77.3 opening comments shall not exceed 15 pages. Finally, comments must be served separately on ALJ Sarah R. Thomas and the assigned Commissioner, and for that purpose I suggest hand delivery, overnight mail, or other expeditious method of service.

________________________

Lynn T. Carew, Chief

Administrative Law Judge

LTC:jgo

ALJ/jgo DRAFT Item 1

3/21/2002

Decision PROPOSED DECISION OF ALJ (Mailed 2/19/2002)

BEFORE THE PUBLIC UTILITIES COMMISSION OF THE STATE OF CALIFORNIA

Order Instituting Rulemaking on the Commission's Own Motion to Determine Whether Baseline Allowances for Residential Usage of Gas and Electricity Should Be Revised.

Rulemaking 01-05-047

(Filed May 24, 2001)

INTERIM OPINION
REGARDING PHASE 1 ISSUES

TABLE OF CONTENTS

Title Page

INTERIM OPINION REGARDING PHASE 1 ISSUES 1 1

TABLE OF CONTENTS i i

I. Summary 2 2

II. Scope Of This Proceeding 3 3

III. Discussion 4 4

A. Updating Energy Usage Data 4 4

B. Percentage of Energy Usage to Use in Calculating Baseline Quantities 8 8

C. Commission Authority to Adjust Baseline Quantities 10 10

1. AB 1890 10 10

2. Water Code § 80110 11 11

3. Interplay Between Our Interpretation of Water Code § 80110 Interpretation and Our Decision to Update Energy Usage Data and Set the Target Percentage at Top of Statutory Range 17 17

4. Timing of Changes to Baseline 18 18

D. Rate Impacts Addressed in Phase 2 19 19

E. Medical Baseline 20 20

1. Translating Medical Baseline Forms Into Languages Other Than English and Into Braille 20 20

2. Outreach 23 23

3. Simplification of Medical Baseline Forms 24 24

4. Availability of Medical Baseline Forms 25 25

5. Recertification 26 26

6. Size of Medical Baseline Allowance 26 26

IV. Going Forward 27 27

V. Comments on Proposed Decision 27 27

Findings of Fact 28 28

Conclusions of Law 30 30

INTERIM ORDER 32 32

I. Summary

In this first phase of our Rulemaking on electric and gas baseline allowances, we increase the baseline allowances for many residential customers and begin the process of improving the medical baseline program. Specifically, we require the utilities to update the data used for calculating baseline allowances to reflect current usage of both gas and electricity, increase baseline allowances to the maximum levels allowed by state law for those customers not already receiving the maximum allowances, and take steps to simplify and improve the process by which customers may obtain additional baseline allowances for medical reasons.

In the Order Instituting Rulemaking (OIR) dated May 24, 2001 opening this proceeding, we stated:

In summary, it has become clear that baseline is an important topic that merits attention at a time when so many Californians are being affected by the largest energy rate increase this Commission has ever had to impose. Section 739, the baseline statute, was added to the Public Utilities Code by the legislature through passage of Assembly Bill 167, the Warren-Miller Energy Lifeline Act, in the 1975-1976 legislative session. After the Commission determined the initial baseline quantities in 1976, it made subsequent revisions and updates in the utilities' general rate cases over the years. Section 739(d)(1) requires, "The commission shall review and revise baseline quantities as average consumption patterns change in order to maintain these [50% to 60%, and 60% to 70% of average residential consumption] ratios." With our recent rate design relying so heavily on baseline quantities to determine which residential customers are affected and to what degree, it becomes more important than ever to ensure the baseline program is up to date. Now is an appropriate time to do such a review. (OIR pp. 5-6)

This decision is the first step in bringing the baseline program up to date. This first step, while significant in expanding the benefits of the baseline program, still provides only limited relief to California's ratepayers. Our actions in Phase 2 of this proceeding may provide additional relief, but as we noted in the OIR:

While we will do our best to adjust baseline quantities to more accurately reflect current consumption levels and significant differentials between customers, we are limited in our review by the statutes setting baseline quantities well below average usage of customers. Because of this, even with revised and updated baseline quantities, the average customer may still find it difficult to reduce usage to baseline levels.

We do, however, begin to make the baseline program more consistent among utilities, which should make it more understandable than it has been in the recent past. In addition, our changes will have the effect of increasing the baseline quantities for most Californians.

Our actions today apply to all Commission-regulated gas and electric utilities and shall be implemented by April 1, 2002.